Timothy B. Lee disses Krugman for dissing Bitcoin. Unfortunately I don't really follow his reasoning, which argues that:
There's just one problem: Mining isn't just a process by which new bitcoins are created. Those newly created bitcoins are a clever mechanism for rewarding miners for participating in the mining process. The point of the mining process is to process Bitcoin transactions. Without it, the Bitcoin network wouldn't function at all. By neglecting to mention this fact, Krugman misleads readers more than he informs them.
Unfortunately, that's par for the course in public discussions of Bitcoin. Bitcoin has a dual character as a currency and a payment network. The latter is what makes Bitcoin useful and potentially important. Yet the former is what has gotten all the media attention.
That's interesting but doesn't really supply enough info for me to understand it. Why does it take such vast computing power to process transactions, given that that's a pretty mature and straightforward task humans have been doing since Sumer?
Lee misunderstands Krugman a lot more than Krugman misunderstands Bitcoin. Krugman's column was hardly a full throated attack on Bitcoin (or gold) mining, rather it was an appeal for a more rational fiscal policy.